Member Drawdown of Shares Triggers Deposit Outflow

Credit unions experienced a net deposit outflow in September as members drew down their share draft balances from the five payroll Fridays in August.

That’s according to the CUNA Mutual Group’s November Credit Union Trends Report, which tracked data through September. At 4.3%, the year-over-year deposit growth rate is below the previous seven years.

“The strategy of keeping deposit rates at historic lows is helping credit unions avoid earning a negative spread on marginal deposits,” Dave Colby, CUNA Mutual chief economist, wrote in the report. “This strategy helps reduce the overall cost of funds and cushions key capital measures, but only works when there is excess liquidity. Current growth results come from membership increases and very limited internal accumulation.”

Portfolios showed the 8.9% annual gain in regular shares accounted for 67% of the total savings gain, the data showed. Money market accounts were up 5.8% from September 2012 and were responsible for 31% of the gain.

Share drafts were down 4.3% in September, but were up 6.2% year-to-date and 8% year-over-year. Colby said this segment accounted for 24% of the annual savings increase.

Combined, these liquid deposit accounts accounted for 122% of the YTD and annual gains, according to the report. Liquid deposits now equal 70.2% of all deposits, up from 56.8% at the beginning of the recession.

Meanwhile, member deposits in certificates of deposit were down 3.1% YTD, 3.9% year-over-year and 19% or $45 billion from their March 2009 peak.